The Strategist

Air Berlin and TUIfly will merge to create a new airline

10/05/2016 - 15:04

German airline Air Berlin will take part in negotiations between TUI Group and Etihad (holder of 29.2% share in the Berlin carrier) for possible establishment of a new European air carrier to operate on resort destinations of the continent. Meeting of board of directors is scheduled on 26 October. The managers will be discussing merger of Air Berlin’s Austrian subsidiary NIKI company with TUIfly airline, owned by TUI Group.

Andy Mitchell
Andy Mitchell
It is expected that fleet of the new company, which haven’t got a name yet, will consist of 61 aircraft. 27 of them are Boeings 737, currently operating on TUIfly’s charter transportation. Another 20 aircraft will come from Air Berlin (now flying under NIKI brand). The Berlin carrier is currently leasing 14 remaining aircraft from TUI.

The merger will make Etihad majority shareholder of the new company, with a 75%-share in the new tourist carrier. The remaining share will come to TUI Group.

Air Berlin has been suffering losses for several years. In 2014, the airline reduced passenger capacity by 10%, cut its fleet by 10 aircraft and closed five bases for the crew.

Over the past three years, Air Berlin’s losses amounted to 1.2 billion euros. The company's earnings have been adversely affected by uncertain situation surrounding new International Airport Berlin-Brandenburg. Its opening has repeatedly been postponed for indefinite period of time.

Now, the German carrier announced that it is going to focus on serving the world's key business centers. Most flights will be performed from the hubs in Berlin and Düsseldorf.

By 2017, the airline plans to increase number of long-haul flights between centers of financial and business life in different countries, in particular, between Germany and the United States. The route network will also include Italy, Scandinavia and Eastern Europe, where "business does not stop", says Air Berlin. 

The company's plans for near future include an intention to lay off about 1 thousand employees under the plan to reduce costs, writes Süddeutsche Zeitung.

According to the publication, the dismissal will affect administrative staff. Currently, the company’s workforce amounts to 8.6 thousand people.

Fear of terrorist attacks in Europe and Brexit have had a significant impact on the touristic industry, yet TUI AG bosses are not confused. Demand from customers in Germany and the Scandinavian countries has fallen, but the group’s president Friedrich Joussen believes that this year TUI will hit the profit target.

Loss of Turkey and North Africa as holiday destinations for Europe Europeans has been well compensated by accommodation prices for Spanish resorts. The business grew there, especially in the Canary Islands and the Balearic Islands, where the group is represented by a network of hotels RIU (TUI owns 50% of shares). Another popular summer destination was Greece.

Lufthansa and tour operator Thomas Cook airlines revised their target income after the terrorist attacks in Europe, and TUI also changed its expectations for revenue in the current fiscal year.

In the company’s opinion, the business will grow not by 3%, but only by 2 (19 billion euros in the last fiscal year). Adjusted earnings should increase by 10% (from 1 billion euros last year). 


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